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Do you currently own a home in Calgary? Are you in a situation where a big expense needs to be covered but money is short right now? Then you might be able to use your home to gain access to the money you need.
There are all sorts of different loan products available to consumers in Calgary when money is tight and there’s just not enough of it to cover a big expense, and a particularly unique one is a HELOC. If you have equity built up in your home in Calgary, you may be eligible to get approved for a HELOC to access cash needed to pay for whatever expense you have that needs to be covered.
Learn how to build home equity, click here.
What is a HELOC?
Also referred to as a second mortgage, a HELOC stands for “home equity line of credit.” Basically, a HELOC allows borrowers in Calgary to use the equity as collateral to borrow against. Depending on how much equity you have, the amount of money that you can borrow will vary.
HELOCs operate as revolving credit. For instance, let’s say you’re approved for a HELOC credit limit of $50,000. That means you can borrow as much as $50,000 against your home’s equity whenever the need arises. You will only be charged interest on the amount borrowed, just like a credit card. If you borrow $10,000, you’ll be charged interest on $10,000, and not on the full $50,000 credit limit.
Once you pay back that $10,000 withdrawn, you can continue to borrow against the full credit limit time and time again. The beauty of a HELOC is that you always have access to cash immediately whenever you need it as opposed to having to go through the loan application process whenever you need to borrow money.
Ever wonder what the true cost of borrowing is? Check out this infographic.
Common Uses of HELOCs in Calgary
There are plenty of reasons why consumers in Calgary may want to apply for a HELOC, including the following:
- Consolidate debt – By using your house as collateral, you can consolidate high-interest debt and save money with the lower rate from a HELOC (learn more about using your house to consolidate high-interest debt).
- Boost the value of your home – You can use the equity in your home to take on a home improvement project that can boost the value of your property.
- Make a large purchase – Whether you want to take a luxury vacation, install a pool in your yard, or even cover the cost of college tuition, a HELOC can help.
The uses of a HELOC are seemingly endless.
HELOC Vs. Home Equity Loan
Many consumers in Calgary may confuse a HELOC with a home equity loan, though they are both somewhat different. While a home equity loan involves borrowing a lump sum of money against the equity in your home that is then repaid in installments, a HELOC works more like a credit card. Basically, a HELOC is revolving credit that you can borrow against over and over again as long as the initial funds withdrawn are paid back.
The one that you choose will depend on different things. Both of these options provide borrowers in Calgary with a way to finance a number of things, including debt consolidation, home renovations, or college tuition.
Do you know how much it costs to buy a house in Canada? Find out here.
When is it a Good Idea to Get a Second Mortgage?
Like any other type of loan, it’s important that you carefully assess your financial situation and determine whether or not a HELOC is your best option. Taking out a loan puts you in the financial position to repay the loans borrowed, plus interest. It’s important that you assess whether or not you’ll be comfortable and capable of covering your payments every billing period.
Further, you’ll want to make sure that you’re borrowing money for the right reasons. Borrowing money for frivolous purposes will only increase your financial burden for no good reason.
That said, it may be a good idea to take out a second mortgage if you’re dealing with a serious emergency, if you’re paying for something that’s going to add value to your home, or if you’re paying for something that will be put to good use. Always assess what you’re spending your money on before borrowing money, as borrowing money just to be spent on unnecessary consumer goods is probably a bad idea.
Need a Loan in Calgary?
Whatever your reason for needing a loan might be, you’ve got several options available to you. But before you apply for a HELOC in Calgary, be sure to get in touch with Loans Canad, we can help match you with the right product and the best provider.